A company has recently raised Sh. 15,000,000. The finance director has the task of evaluating a project which has 4 years of economic life and zero salvage value. The expected cash flows are as follows:Project YearCash Flows (Sh.) 15,000,00024,000,00033,800,0004 800,000 Given that company’s cost of capital is 30% and that the amount raised would be used to finance the project, advice the company based on.i. Payback periodii. Net present value of the project

The payback period of the project is the period within which initial investments is generally…

Answered: Given that company’s cost of capital is…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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A company has recently raised Sh. 15,000,000. The finance director has the task of evaluating a project which has 4 years of economic life and zero salvage value. The expected cash flows are as follows:

Project Year	Cash Flows (Sh.)

1	5,000,000
2	4,000,000
3	3,800,000
4	800,000

Given that company’s cost of capital is 30% and that the amount raised would be used to finance the project, advice the company based on.

i. Payback period

ii. Net present value of the project

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1) payback period

2) Net present value of the project

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